Market waits for next trigger

J Mulraj / Jul 19, 2004, 07:42 IST

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The market seems to be moving in a band of 4,800-5,000. Good corporate results for the quarter to June is creating the upward push, whilst truancy of the monsoon is creating the downward push.

<div class="section1"><div class="Normal">The market seems to be moving in a band of 4,800-5,000. Good corporate results for the quarter to June is creating the upward push, whilst truancy of the monsoon is creating the downward push. Wayward monsoon behaviour has already damaged prospects for the kharif crop of cotton and oilseeds, both of which are likely to be significantly lower. If rains do not pick up in the remaining month, it will affect both kharif and the later, rabi, crop, leading to a lower agri production growth. Since agriculture accounts for 22 per cent of the economy, a lower, or zero, growth would impact GDP forecasts. This is one concern that is keeping the market down. The concern over disappearance of liquidity after transaction tax was introduced in the budget, has abated. Transaction volumes on BSE and NSE combined fell about 16 per cent in the first two days of the week, but have more than recovered since. The finance minister is to make an announcement on Monday, probably not imposing it in the debt market, where spreads are too thin, and reducing it in the equities market. He may also reduce it considerably or remove it in the F&O segment. Concerns are more global in nature. End June, the US Federal Reserve raised interest rates by a quarter per cent and several such hikes are expected. Such hikes would do several things. It would make bond markets more attractive relative to equity markets. It would slow, or stanch, the boom in property prices in the US, which, thanks to refinancing, created surplus in the hands of property owners, who spent it. It would curtail individual consumption, which is what is propping up the US economy. A slowdown of both the US and the Chinese economies, would not be conducive to bull runs anywhere in the world. Then there is the ''X'', or unknown, factor of a terrorist attack, prior to the US elections, in order to disrupt them. On the positive side, corporate results for the quarter to June 2004 are encouraging. Infosys, the technology darling, came out with quarterly sales and profit increases of 39 per cent to Rs 15.1 billion, and Rs 3.8 billion respectively. It also upped its guidance for income growth this year to 39 per cent. The market cheered. UTI Bank''s profits were up 35 per cent for the first quarter to Rs 706 million, HDFC Bank''s were up 30 per cent to Rs 1.4 billion. Biotech company Biocon more than doubled its post tax profit to Rs 486 million. It has doubled the number of patent filings. The most widely talked about event in corporate circles was the willing away of her assets, by Mrs M P Birla, to their auditor, R S Lodha, unrelated to the family. The family wishes that the estate go to charity, as desired by the late M P Birla. A legal challenge seems likely. Perhaps fears of such occurrences may lead to faster ''creeping acquisition'' of shares by promoters of other family managed groups. Valuations of stocks look good, and if monsoon picks up and GDP growth is over 6 per cent, markets would rally. Investors should keep one eye on rain, one on Fed and on the convoluted behaviour of our economic policy makers. </div> </div>

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